PROJECT MANAGEMENT THE RISKS!

January 8, 2018 | Author: Anonymous | Category: Social Science, Law, Contract Law
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NEC 3 PART 1

By Trevor Drury © Morecraft Drury 2014

PROGRAMME Day 1 NEC 3 – Option A Priced contract with activity schedule o

Main core clauses overview : o

o

o

o

o o

Contractor and PM responsibilities, time, testing & defects, stage payments, activity schedules, Early Warning Notices, risk review meetings and risk registers, compensation events, quotations, termination

Change Overview : notices, timing – group work exercise Timescales for Compensation events – group work exercise Compensation events, changes to prices – group work exercise session Programme – the accepted programme, revision/update, evaluating extensions of time, ownership of float Questions Homework question paper handed out for completion by Day 2

© Morecraft Drury 2014

PROGRAMME o

Day 2 o o o o o o

o o o o o o

Review of question paper from Day 1, answers and discussion of issues raised The NEC Short Form of Contract and how it differs from the main NEC 3 Invitations to tender (ITT) Works information Contract data parts 1 and 2 Secondary & Option Clauses W, X, Y and Z clauses Schedule of cost components Dispute resolution Payment and the Construction Act and group worked exercise NEC – signed underhand or by deed ( limitation period issues) Changes in the latest NEC 3 April 2013 edition (BIM, Project Bank Accounts etc.) Questions © Morecraft Drury 2014

CORE CLAUSES General: o

The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and c0-operation (10.1)

o

Terms that are identified in the Contract Data are in italics e.g. “Employer”

o

Defined Terms have CAPITAL initials e.g. “Completion Date”

© Morecraft Drury 2014

CORE CLAUSES - IDENTIFIED AND DEFINED TERMS o

The Accepted Programme: o

o

The programme in the Contract Data or the latest accepted by the PM

Completion is when the Contractor has: o

Completed all work which the Works Information states that he is to do by the Completion Date and corrected notified Defects which would have prevented the Employer and others from using the works

© Morecraft Drury 2014

CORE CLAUSES - IDENTIFIED AND DEFINED TERMS o

o

Defects Certificate: a list of defects issued by the Supervisor before the defects date and uncorrected. If no defects, a statement that there are none The Risk Register is a register of risks listed in the Contract Data and risks identified by the PM or the Contractor as an early warning . It must include a description of the risk and actions to be taken

© Morecraft Drury 2014

CORE CLAUSES - IDENTIFIED AND DEFINED TERMS o

o

Works information is: information which specifies and describes the works or states any constraints on the Contractor. This is contained within the Contract Data or instruction Defined Cost : cost of components in the Shorter Schedule of Cost Components

© Morecraft Drury 2014

CORE CLAUSES - IDENTIFIED AND DEFINED TERMS o

The Price for Work Done: o

Total of Prices for each group of completed activities and each completed activity not in a group

o

Prices are lump sum prices for each of the activities on the Activity Schedule unless changed in accordance with the contract i.e. by an instruction

© Morecraft Drury 2014

CORE CLAUSES - COMMUNICATIONS o

o

o

o

Must be in a form that can be read, copied and recorded Has effect when received at last address notified/address stated in Contract Data Reply within the period for reply ( as set out in Contract Data) If PM does not accept a Contractors communication, PM must give reasons and Contractor must resubmit. One such reason can be more information is needed from the Contractor. This is not a Compensation Event © Morecraft Drury 2014

CORE CLAUSES – PM & SUPERVISOR o

o

o

Acceptance of a communication from the Contractor or of his work does not change the Contractors responsibilities or liability PM or Supervisor can delegate actions

PM can instruct changes to the Works Information or a Key Date

© Morecraft Drury 2014

CORE CLAUSES – EARLY WARNING o

Cl. 16.1 Both Contractor & PM give an Early Warning to the other as soon as either becomes aware of any matter which could: 1. 2. 3. 4.

Increase the total of the Prices Delay Completion Delay a Key Date Impair performance of the works in use

© Morecraft Drury 2014

CORE CLAUSES – EARLY WARNING o

o

o

Contractor may give an EWN to the PM of any matter that could increase his total cost!!! PM enters early warning matters into the Risk Register PM or Contractor may notify the other to attend a risk reduction meeting

© Morecraft Drury 2014

CORE CLAUSES – EARLY WARNING RISK REDUCTION MEETING o

o

o

o

o o

Consider proposals for reducing or avoiding the registered risk Seek solutions to bring advantage to all affected Decide actions and who, as per the contract will take them Decide which risks have been avoided or have passed and can be removed from the register PM revises Risk Register and issues revision May require an Instruction which is issued simultaneously

© Morecraft Drury 2014

WHAT SHOULD A RISK REGISTER CONTAIN? o o o o o o o o o o

Description of the risk % likelihood Consequences: Time impact – Low, Medium, High The owner of the risk Cost risk allowance in total of Prices i.e. What is included in the contract Cost reduction allowances for events outside Prices managed by the Client as a contingency Predicted risk expiry date Actual risk expiry date Actions to avoid or reduce risk Comments © Morecraft Drury 2014

FOR NEXT WORKSHOP! o

o

o

Review your own Risk Register template. Does it include all of the columns and information above? Everyone to review a risk register and understand how it works and why it is important Bring with you for next time a copy of a real risk register that you have created or are using on a project.

© Morecraft Drury 2014

EARLY WARNING & CHANGE PROCESS POTENTIAL EVENT

Quotation submitted by Contractor within 3 weeks (Clause e) Quotation Accepted by PM within 2 weeks (Clause f) Copyright Morecraft Drury

Early Warning notice (Clause a)

Risk Reduction meeting (Clause b)

Is a CE PM gives instruction to submit quotation as to time and cost consequences (Clause d)

No CE

No change to Completion Date or Prices

No change to Completion Date or Prices when event due to fault of Contractor or if there is no time or cost effect (Clause c)

© Morecraft Drury 2014

EARLY WARNING & CHANGE PROCESS POTENTIAL EVENT

Quotation submitted by Contractor within 3 weeks 62.3 Quotation Accepted by PM within 2 weeks 62.3 Copyright Morecraft Drury

Early Warning notice 16.1

Risk Reduction meeting 16.3

Is a CE PM gives instruction to submit quotation as to time and cost 61.1

No CE

No change to Completion Date or Prices

No change to Completion Date or Prices when event due to fault of Contractor or if there is no time or cost effect 61.4

© Morecraft Drury 2014

CORE CLAUSES – CONTRACTOR’S RESPONSIBILITIES o

o o

o

o

Contractor provides Works in accordance with the Works Information. As the Contractor’s price is tendered on this information it therefore needs to meet the clients needs/requirements!! Contractor may design all or parts of the Works. Contractor does not proceed unless PM has accepted its design. Grounds for not accepting – not in accordance with Works information or applicable law A requirement to co-operate with Others in receiving/providing information © Morecraft Drury 2014

CORE CLAUSES – CONTRACTOR’S RESPONSIBILITIES o

o

o

o

Any costs incurred by Employer where Contractor fails to provide services etc. set out in Works Information is assessed by PM and paid for by the Contractor. If PM decides work does not meet Condition by a Key date and the Employer incurs additional cost, PM assesses cost within 4 weeks and is paid for by Contractor. Contractor submits proposed sub-contract conditions to PM for acceptance unless an NEC form is used or PM agrees that no submission required Must accept Instructions from PM and Supervisor © Morecraft Drury 2014

CORE CLAUSES – TIME o

o

o

o

If Programme not contained in Contract Data, Contractor to submit to PM for acceptance within period stated (31.1) Every programme must have all of the information set out in clause 31.2. Note that it must include float, time risk allowances & H&S requirements Method statement – how each operation is to be undertaken , plant(equipment) and other resources to be used Advice! – request electronically with full network analysis. You may also wish to specify the software to be used e.g. Primavera P6 or Asta Power project © Morecraft Drury 2014

CORE CLAUSES – TIME o

Timing o

Within 2 weeks PM must accept or reject programme giving reasons for non-acceptance (31.3)

o

Reasons limited to: o o o o

Contractor’s plans not practicable Does not show information required by contract Unrealistic Does not comply with the Works Information

© Morecraft Drury 2014

CORE CLAUSES – TIME o

For Option A o

The Contractor is required to provide information that shows how each activity on the ACTIVITY SCHEDULE relates to the activities/operations on the accepted programme (31.4)

o

A revised programme must be submitted by the Contractor for acceptance (32.2): o o

Within the period for reply after being instructed to Within the interval stated in the Contract Data

© Morecraft Drury 2014

CORE CLAUSES – TIME o

The Revised Programme (32.1) must show: o

Actual progress and effect on subsequent work

o

The effect of implemented CE’s and EW’s

o

How the Contractor plans to overcome delays remedy defects

o

Other Contractor proposed changes to Accepted Programme

© Morecraft Drury 2014

CORE CLAUSES – TIME o

Take over: o

Employer does not have to take over the works before the Completion Date if stated in Contract Data

o

Takeover – up to 2 weeks after Completion (35.1)

o

Employer may use any part of the works before Completion certified however; that part is deemed to have been taken over unless: o o

For reason set out in Works Information To suit the Contractor’s method of working

© Morecraft Drury 2014

CORE CLAUSES – TIME o

Acceleration (36): o

PM may instruct a quotation stating Key Dates to be included

o

Quotation must include changes to Prices and a revised programme showing the earlier Completion Date and changed Key Dates

o

When PM accepts such a quotation he accepts changes to prices , Completion Date and Key Dates and accepts the revised programme

© Morecraft Drury 2014

CORE CLAUSES – TESTING & DEFECTS o

Supervisor: o

Must not cause unnecessary delay to work or payment conditional upon test results (40.5)

o

PM assesses cost of any re-tests which is to be paid for by the Contractor (40.6)

o

Up to the defects date Supervisor can instruct Contractor to search for a defect giving reasons (42.1)

o

Until the defects date Supervisor notifies Contractor of each defect as soon as identified and the Contractor vice versa (42.2) © Morecraft Drury 2014

CORE CLAUSES – TESTING & DEFECTS o

Correcting defects: o

Contractor to do so whether notified or not

o

Contractor corrects a notified defect before end of defect correction period . This begins at Completion, for Defects notified before Completion and when the Defect is notified for other Defects. (43.2)

© Morecraft Drury 2014

CORE CLAUSES – TESTING & DEFECTS o

o

o

o

o

Supervisor issues Defects Certificate at defects date or defects correction period, which ever is the later (43.3) Access arranged by PM for correction of defects after take over Defects can be accepted and Works Information amended (44.1) Contractor submits quotation to reduce Prices and Completion for PM acceptance (44.2) Contractor pays for uncorrected defects (45.1/45.2) © Morecraft Drury 2014

CORE CLAUSES – PAYMENTS o

o

PM assesses amount due including VAT and considers any application submitted by Contractor 25% withheld if Contractor fails to submit first programme (50.3)

o

PM certificate within 1 week of assessment date (51.1)

o

Payment within 3 weeks of assessment date(51.2)

o

Contractor’s costs not included in the Defined Cost are deemed included in the fee © Morecraft Drury 2014

CORE CLAUSES – PAYMENTS o

Activity Schedule: o

Information contained therein is not Works Information or site Information – it is purely for payment purposes

o

Must be updated if Contractor changes method/programme for acceptance by PM (54.2)

o

PM may not accept revision : o o

o

If it does not accord with the Accepted Programme Prices are not reasonably distributed – Cash flow /over payment issue Total price has changed

© Morecraft Drury 2014

CORE CLAUSES – PAYMENTS o o

Set out in clause 60 – 19 events listed Covers: o

o o o o o o o

PM instructions changing Works Information Access issues Late information Instruction to stop or not to start work Failure to respond to a communication Instruction to deal with object of value /historic/interest PM changes a previous decision PM withholds acceptance of a quotation for reasons not in accordance with contract

© Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

Covers (cont’d) o

Supervisor causes delay

o

Contractor encounters physical conditions that could not have been foreseen or chances of occurrence very small

o

Adverse weather compared to last 10 years

© Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

Notification: PM/Supervisor instruction – PM notifies Contractor at the time of giving the Instruction. He requests quotations unless Contractor at fault (61.1) o PM may instruct Contractor for a quotation for a proposed instruction or changed decision – has no effect until accepted o Contractor notifies PM of an event that has happened or expects to happen o Contractor must notify within 8 weeks. Over 8 weeks loss of right to recover change in Prices and Completion Date/Key Date unless PM should have notified (61.3) o

© Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

o

Completion Date and Prices are not changed if PM considers event due to Contractor, has not happened/not expected to happen, has no effect or is not a compensation event stated in the contract. If PM fails to respond within 1 week ( or otherwise agreed), Contractor may notify to that effect. PM has a further 2 weeks of this notice to reply otherwise it is considered acceptance by PM a Compensation Event and an instruction to submit a quotation (61.4)

© Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

Quotations: o

PM may instruct alternative quotations (62.1)

o

Quotations include changes to Prices, delay to Completion Date and Key Dates. Full details to be provided of its assessment including alterations to the Accepted Programme (62.2)

o

Contractor has 3 weeks to submit. PM has 2 weeks to reply (62.3)

o

If PM instructs Contractor for a revised quotation, Contractor has a further 3weeks (62.4) © Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

If PM fails to respond to quotation(s) within time, Contractor gives notice and PM has 2 weeks to reply. Failure to do so enables Contractor to treat quotation as accepted. (62.6)

© Morecraft Drury 2014

CORE CLAUSES – ASSESSING COMPENSATION EVENTS o

Prices are assessed as to the effect of the compensation event on (63.1): the Defined Cost of work done o the forecast Defined Cost no yet done o the resulting fee o

o

If PM notifies Contractor that he did not give an Early Warning of a compensation event, the event is assessed as if the Contractor did (63.5)

© Morecraft Drury 2014

CORE CLAUSES – ASSESSING COMPENSATION EVENTS o

o

o

The effect of a compensation event may reduce the total Defined Cost (63.10) Assessments for changes to Prices for compensation events are in the form of changes to the Activity Schedule (63.12) If agreed, rates and lump sums can be used to assess compensation events (63.14)

© Morecraft Drury 2014

CORE CLAUSES – PROJECT MANAGER’S ASSESSMENTS o

When (64): o

Contractor has not submitted a quote & details

o

If Contractor has not assessed correctly

o

If the Contractor fails to submit a programme

o

When there is no Accepted Programme PM makes his own assessment

o

If PM fails to assess a compensation event within time, Contractor notifies, PM has another 2 weeks. If still no reply, Contractors quote deemed accepted © Morecraft Drury 2014

CORE CLAUSES – COMPENSATION EVENTS o

Compensation event becomes implemented when (65.1): PM notifies acceptance of quote o PM notifies of his own assessment o Contractor’s quotation deemed accepted by PM o

The Changes to Prices, Completion Date and Key Dates are included in the notification of a compensation event. o NB: There is no EOT or Loss and Expense provision beyond Compensation Events o

© Morecraft Drury 2014

COMPENSATION EVENTS POTENTIAL COMPENSATION EVENT

Time? Clause?

C Notifies PM

Time? Clause?

PM instructs C to give Quotation(s) Clause? Time?

Acceptance

PM’s response

2 weeks Clause?

C submits quotations(s) Clause?

Decision not to proceed

PM’s to make Own assessment 2 weeks

Clause?

Time?

C submits revised quotations(s)

C informed of PM assessment Copyright Morecraft Drury

© Morecraft Drury 2014

COMPENSATION EVENTS POTENTIAL COMPENSATION EVENT

8 weeks 61.3

C Notifies PM

1 week 61.4

PM instructs C to give Quotation(s) 62.3

Acceptance

PM’s response

2 weeks 62.3

C submits quotations(s) 62.4

Decision not to proceed

PM’s to make Own assessment 2 weeks

62.3

3 weeks

3 weeks

C submits revised quotations(s)

C informed of PM assessment Copyright Morecraft Drury

© Morecraft Drury 2014

THANK YOU If you have any questions please contact

[email protected] Morecraft Drury Central Court 25 Southampton Buildings London WC2A 1AL www.morecraft-drury.com © Morecraft Drury 2014

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